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James Love

James Love

Posted: August 3, 2006 02:08 PM

US regulation of Korean Drug prices


The United States government regulates drug prices in Korea. Really. But to ensure that prices are high in Korea, not low.

Julie Patel has taken a look at this trade agreement that most Americans know nothing about. She focuses on four expensive drugs for cancer drugs. One conclusion -- the Korea government is required, by the United States, to pay higher prices than the US government does, for the same drugs.

In the table below, Julie looked at prices paid by (1) the Veterans Administration, Department of Defense, Public Health Service (Indian Health Service), and U.S. Coast Guard, known as the "big four," (2) The U.S. Federal Supply Schedule Price which is multiple award, multi-year federal contract that is available for use by any Federal Government agency, and (3), the prices the Korean government is required to pay, under the so called "A-7" pricing agreement, which requires Korea to reimburse at prices that are the average of prices paid in 7 high income countries.

For all four cancer products she examined, the prices paid by the US government, under the "big four" or FSS schedules, were always lower than the prices that Korea must pay under the A-7 pricing agreement. In some cases, the differences were very large. Compared to the "Big 4" prices, the A-7 prices were 20 to 84 percent higher.

Prices for four drugs
(price per year or completed treatment)

Drug Big 4 FSS A-7
Iressa $14,516 $18,775 $23,696
Velcade $47,991 $47,991 $57,685
Gleevec(600) $28,654 $43,898 $52,831
Temodar $16,935 $16,935 $20,255

She also said, "As a share of income, the differences are even more clear. In the table below, current prices are expressed as a percentage of 2004 per capita GNI ($14,000 in Korea, and $41,440 in the U.S.), illustrating the relative hardship that Korea faces with the A-7 pricing agreement."

Prices as a share of income

Drug Big 4 FSS A-7
Iressa 35%
45%
169%
Velcade 116%
116%
412%
Gleevec(600) 69%
106%
377%
Temodar 41%
41%
145%

share-inc-4drugs.001.png

This policy is not popular in Korea.

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